Deutsche Bank announced on Tuesday the opening of its innovation lab in Palo Alto, California, the third of its kind for the banking giant, as it seeks to embrace and implement new technology for the client-driven environment it faces.
Seated in the heart of Silicon Valley, the lab will entertain pitches from fintech (financial technology) startups, as many as 500 each year, as it moves its banking services into what it calls “Strategy 2020.”
According to the bank’s Group Chief Operating Officer, Kim Hammonds, “The Silicon Valley lab will help Deutsche Bank offer clients new and improved products and services, strengthen efficiency and deepen its relationships with the Valley’s innovation and investor communities.”
She also recently told the American Banker that they are looking to forge mutually beneficial relationships with fintech startups in areas of internal infrastructure, digital authentication, security, and analytics.
At its opening event, Co-Chief Executive John Cryan and Hammonds heard short pitches from 15 fintech startups and moved a few of them forward for further consideration by the bank’s business divisions that test and evaluate technology solutions.
Among the ideas that moved forward were areas related to identity verification, data analysis software, and blockchain innovations. As banks continue to move forward in this digital age of online banking and investment, these are the technologies that must be continually implemented and enhanced.
Also attending the event were venture capital firms and some Deutsche Bank clients.
Partnering With Technology Giants
Deutsche Bank has partnered with IBM in its Silicon Valley lab. Two previous lab openings last year, in Berlin and London, partnered with Microsoft and HCL. All three of these tech giants have plenty of experience running startup labs and will supply expertise and resources.
In Silicon Valley specifically, local universities will also be brought into the mix.
Not The First
Deutsche Bank is not the first banking giant to open such labs to evaluate emerging technologies. Barclays has run incubation labs since 2013, in London and New York, and American Express also recently opened a lab in Palo Alto. The American Express focus is on cloud computing and infrastructure for mobile devices.
According to Hammond, the bank will spend about one billion euros on digital innovations between now and 2020. While it is not itself investing in fintech startups, it is introducing the most promising to venture capitalists and its own investment clients. The bank’s work will be to trial and implement the technologies as they are developed.
A Smart Move
Embracing fintech is something big banks have been a bit slow to do. While all of them have developed technology to serve clients online and to provide a secure environment for online banking, they are facing increasing competition with such companies as PayPal, Square, and Prosper.
Consumers have become far more comfortable with managing their money and investments in digital environments, and they want to do so quickly and on-the-go. Banks that embrace this new consumer-driven behavior and develop the technologies to support it will survive.
According to Pat Grady, a partner at Sequoia Capital, a venture capital firm, “The world is far more connected today than it was 15 to 20 years ago. The tools that are available – cheap storage, cheap computing, and wonderful analytics – have changed, the regulatory environment as changed, and people are way more comfortable managing their money and business online… if you want to dream a little, the entire financial system could be remade with companies we’re seeing today.”
According to Grady, if the banking giants of the world intend to stay relevant and competitive, they must continue to re-model their digital environments. It looks as if Deutsche Bank is doing just that.
[Photo by Michael Probst/AP]